LEGISLATIVE COUNSEL'S DIGEST

Existing law imposes penalties when a taxpayer fails to timely file an income tax return or fails to timely pay the tax due as shown on, or as required to be shown on, the tax return, unless it is shown that the failure is due to reasonable cause and not due to willful neglect.

This bill, for taxable years beginning on and after January 1, 2018, would require the Franchise Tax Board to provide relief from a penalty that otherwise would be applicable for failure to file a tax return or failure to pay tax when due if the taxpayer was not previously required to file a return or the taxpayer has no penalties for the 4 taxable years before the taxable year for which the penalty was applied, the taxpayer has filed all currently required returns or filed an extension of time to file, and the taxpayer has paid, or arranged to
pay, any tax due.

This bill, for taxable years beginning on and after January 1, 2018, would require the Franchise Tax Board, upon request by an individual taxpayer, to abate a failure-to-file or failure-to-pay timeliness penalty if the taxpayer was not previously required to file a California personal income tax return or the Franchise Tax Board has not imposed a timeliness penalty in the year of the request or prior 4 years, the taxpayer has filed all required returns as of the date of the request for abatement, and the taxpayer has paid, or is in a current arrangement to pay, all tax currently due.

Digest Key

Vote:
MAJORITY
Appropriation:
NO
Fiscal Committee:
YES
Local Program:
NO

Bill Text

The people of the State of California do enact as follows:

SECTION 1.

Section 19132.5 of the Revenue and Taxation Code is repealed.

19132.5.

(a)In the case of a qualified taxpayer, no penalty shall be assessed under Section 19132 if the return is filed timely (not later than the extended due date granted under Section 18567 or 18604) and the tax required to be paid on or before the due date of the return, without regard to extension, is paid within the following time:

(1)In the case of an individual, partnership, or fiduciary, within six months of the original due date of the return.

(2)In the case of a corporation, within seven months of the original due date of the return.

(b)Any penalty imposed under Section 19132 shall be assessed from the original due date of the return if the taxpayer fails to pay the tax within the time specified in this section.

(c)This section shall apply to payment of the amount shown as tax on the original returns required to be filed during calendar year 1994.

(d)For purposes of this section, “qualified taxpayer” means any corporation, fiduciary, partnership, or individual taxpayer to whom one of the following applies as a result of the Northridge earthquake of January 1994, any related aftershock, or any related casualty:

(1)The
qualified taxpayer sustained any significant property loss.

(2)The qualified taxpayer suffered a loss of employment due to property damage suffered by his or her employer.

(3)The qualified taxpayer realized significant loss of business income from a business located within the Northridge earthquake area.

SEC. 2.

Section 19132.5 is added to the Revenue and Taxation Code, to read:

19132.5.

(a) (1) An individual taxpayer may elect to request abatement of a timeliness penalty under this section for a timeliness penalty that has been considered and rejected for abatement, waiver, or rescission pursuant to the provisions of the section under which the penalty is imposed.

(2) An individual taxpayer may, in lieu of requesting consideration for abatement, waiver, or rescission pursuant to the section under which the timeliness penalty is imposed, instead request abatement of a timeliness penalty under this section.

(b) If a taxpayer described in subdivision (a) requests, either orally or in writing, the abatement of a timeliness penalty pursuant
to this section, the timeliness penalty shall be abated if all of the following apply:

(1) The taxpayer has not previously been required to file a California personal income tax return under Part 10 (commencing with Section 17001) or no other timeliness penalty has been imposed by the Franchise Tax Board in the calendar year of the request for abatement or in the immediately preceding four taxable years.

(2) The taxpayer has filed all returns required under Part 10 (commencing with Section 17001) as of the date of the taxpayer’s request for abatement under this section.

(3) Excluding the timeliness penalty that is the subject of the abatement request under this section, the taxpayer has paid in full, or arranged to pay pursuant to an installment agreement, any tax, penalties, fees, and interest due for the required
returns pursuant to paragraph (2) and the taxpayer is current with all installment payments.

(c) For purposes of this section, “timeliness penalty” means a penalty imposed under Section 19131 or 19132 with respect to a return filed by an individual.

(d) For purposes of this section:

(1) A timeliness penalty imposed and subsequently abated due to a determination of reasonable cause, or reasonable cause and not willful neglect, with respect to the taxpayer or the taxpayer’s spouse shall be considered to have not been imposed for purposes of determining eligibility for timeliness penalty abatement under this section.

(2) A timeliness penalty shall be considered imposed on the original due date of the return for the taxable year for which the penalty is
imposed.

(e) Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.

(f) This section shall apply to requests for abatement made for taxable years beginning on or after January 1, 2018.

SECTION 1.

It is the intent of the Legislature to enact legislation that would require the Franchise Tax Board to provide a first-time penalty abatement waiver to relieve taxpayers from a penalty for failure to file a tax return or for failure to pay the tax due, similar to the administrative waiver that may be granted by the Internal Revenue Service, for first-time taxpayers or for taxpayers who have had no penalties for the previous four years.

SEC. 2.Section 19188 is added to the Revenue and Taxation Code, to read:

19188.

Notwithstanding any other law, with respect to taxable years beginning on or after January 1, 2018, the Franchise Tax Board shall provide relief from penalties that otherwise would be applicable for failure to file a tax return or failure to timely pay the amount due, when all of the following requirements are met:

(a)The taxpayer was not previously required to file a return or the taxpayer has no penalties for the four taxable years before the taxable year for which the penalty was applied.

(b)The taxpayer has filed all currently required returns or filed an extension of time to file.